Data through: October 2026 · updated Nov 5 · Updates: Monthly
MThe three bars show the last 3 months for this indicator, oldest left to newest right. Bar height reflects each reading relative to the other two — the tallest is the highest of the three, the shortest the lowest.
Historical context: Currently in the 23rd percentile — near historically low/favorable levels.
What this means right now: EBP is moderately negative — the risk premium is below average and investors are comfortable holding credit risk. This is the most common reading, about half of all months since 1973 (50%).
Excess Bond Premium · Monthly · 1973–2026
NBER recessions
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Monthly values
Excess Bond Premium — the last 12 months
Every month's reading, with the band the heatmap gives it. The chart above shows the same series in full.
Month
Value
Band
Oct 2026
−0.27
Healthy reading
Sep 2026
−0.38
Healthy reading
Aug 2026
−0.22
Healthy reading
Jul 2026
−0.31
Healthy reading
Jun 2026
−0.28
Healthy reading
May 2026
−0.37
Healthy reading
Month-end readings of the same series as the chart. Values are the current record, not point-in-time: a month that has since been revised shows its revised value.
What is the Excess Bond Premium?
The Excess Bond Premium (EBP) is the extra yield corporate bonds pay beyond what default risk alone explains — the market's fear premium. Federal Reserve researchers (Gilchrist & Zakrajšek, 2012) split corporate bond spreads into two parts: compensation for expected defaults, and everything left over. The leftover part is the EBP.
It matters because it moves with lenders’ nerves. Federal Reserve research found it rising ahead of past slowdowns; on the site’s own record, a recession was under way or began within a year after 5 of its 12 rises to +0.5 or above since 1973. It was at +0.5 or above, and already published, before 1 of the 7 recessions since 1973 began.
How to read it: the EBP is signed and centered on zero. Near zero means normal credit conditions. Positive means investors are demanding more compensation than defaults justify — fear is rising and credit is tightening. Negative means they are accepting less than defaults justify — calm, sliding toward complacency the deeper it goes. Unlike most indicators here, the "good" reading is near zero or mildly negative, not simply "low": a deeply negative EBP is froth, not health.
How We Color-Code the Excess Bond Premium
Our heatmap colors this indicator against historically significant thresholds:
Below −0.50
Very calm — the risk premium far below average, as in about 1 month in 20 since 1973 (5%)
−0.50 – 0.00
Below average — investors comfortable with credit risk; the most common reading, about half of all months since 1973 (50%)
0.00 – 0.50
Normal — the premium near its average, as in about 3 months in 10 since 1973 (30%)
0.50 – 1.50
Elevated — investors asking more than defaults justify, about 1 month in 8 since 1973 (13%); about 5 in 10 of those months fell inside a recession (38 of 82)
1.50 or above
Crisis — only 14 months since 1973 have read this high (2%), all in 2000, 2002 and 2008–09
Historical Extremes — What Happened Next?
When this indicator reaches extreme levels, history shows consistent patterns:
Oct 2008Post-Lehman Credit Freeze
+3.42
The highest reading on record, as corporate bond markets froze in the financial crisis. The premium ran far above what expected defaults justified.
Mar 2020COVID Credit Spike
+1.19
The COVID dash for cash sent the premium up sharply as bond spreads blew out. It was back below zero by July 2020, four months later, after the Fed announced its corporate credit facilities.
Jul 2003Post-Dot-Com Complacency Trough
−1.07
The deepest negative reading on record, in an episode below −0.5 that lasted to August 2005. The premium reached +0.5 again 28 months after that episode ended, into the 2008 crisis.
Frequently Asked Questions
What is the difference between the EBP and a standard credit spread like the BAA spread?
A standard credit spread, like the Baa minus 10-year Treasury, has two parts. The first is the expected default loss — the actuarially fair compensation for holding a bond that may default. The second is the excess bond premium — compensation for bearing the risk itself, beyond the expected loss. During calm markets, the EBP can be near zero or negative (spreads compress below expected-loss levels). During stress, both components widen, but the EBP often widens disproportionately. The EBP isolates the risk-appetite part — the part that moves with lenders' willingness to take credit risk.
Why is a negative EBP sometimes a warning sign?
A deeply negative EBP means investors accept spreads below the expected default loss — they are paying up for credit risk. Readings below −0.5 came in seven episodes since 1973. After each of the first six the premium reached +0.5 within 7 to 40 months; the 2003–05 episode was followed by the 2008 crisis. No reading has reached +0.5 since the 2021–22 episode.
How quickly does the EBP respond to stress events?
The EBP is published monthly, about five weeks after the month ends, so it is slower than daily spread measures. When stress hits it can jump within a month. The 2008–09 cluster peaked at 3.42 in October 2008, and the March 2020 spike reached 1.19. The 1998 LTCM and Russia episode barely registered, at +0.23. Moves of more than 0.3 in a month have come about 1 month in 10 outside recessions since 1973 (60 of 570, through September 2026), in both directions.
How is the EBP calculated at the Federal Reserve?
The Fed's EBP follows the Gilchrist-Zakrajšek (2012) method. It starts from the GZ spread, the average credit spread across a large set of corporate bonds. For each bond, a model estimates the spread explained by the issuer's default risk and the bond's features, such as maturity and coupon. The EBP is the part of the spread that the model leaves unexplained, averaged across the bonds. The methodology is described in "Credit Spreads and Business Cycle Fluctuations" (AER, 2012).
How are this page's colour levels set?
Zero is the dividing line: the EBP is what is left of corporate spreads after expected defaults, centered on zero, so a reading above zero means investors are asking more than defaults justify and one below means less. Below −0.50 is very calm, the premium far below average and sliding toward complacency. From −0.50 to zero is below average, investors comfortable with credit risk. From zero to 0.50 is normal, the premium near its average. 0.50 or above is elevated, the level whose rises this page counts against recessions, and 1.50 or above is crisis, reached only in 2000, 2002 and 2008–09. They are fixed levels, set in June 2026 with the series' whole history in view, and they do not move as new data arrives. A given reading gets the same colour in 2008 as today, so a change of colour is a change in the risk premium, never in the yardstick.